Couple put retirement plans at risk by failing to talk

One in five couples have never discussed financial planning for retirement.

Published:10:00Saturday 08 October 2016

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Fewer than one in three people (32 per cent) over the age of 40 who live with their spouse or partner have made arrangements to ensure that if they die their other half will continue to receive an income from their pension.

This revelation is one of the findings of Prudential’s latest annual research1 into the retirement aspirations and financial planning of UK couples aged 40 and over.

This year’s results found couples risking their retirement plans by failing to talk to each other about their finances. More than one in five couples (22 per cent) have never discussed their financial plans for retirement and one in 10 (10 per cent) last talked about their retirement finances more than six years ago.

Prudential has conducted its couples retirement research every year since 2010 and the results have consistently found that women’s retirements are most at risk from couples’ lack of financial planning conversations. This year’s figures show that one in 10 women will be completely reliant on their partner’s income in retirement while a further 13 per cent expect their income to come entirely from the State Pension.

Those couples who have discussed their retirement finances estimate that they will live on a joint retirement income averaging nearly £28,500. However, this figure is at risk of reducing dramatically if the worst were to happen to one of the partners – nearly three in 10 people (29 per cent) have pension savings that will provide an income only to them as an individual.

Around three in five couples (62 per cent) have no idea how much annual income they expect to receive as a couple when they are both retired. Meanwhile 18 per cent of people say they do not know how much money their partner has in pension savings.

Kirsty Anderson, a retirement income expert at Prudential, said: “Life is busy for everyone and it is tempting to avoid difficult conversations, but couples really do need to talk about their finances and retirement planning in particular. A conversation about what might happen to a couple’s finances if the worst should happen to one partner can be particularly difficult but it could make the difference between the survivor being left with nothing or having a comfortable retirement.

“Couples who don’t talk about their retirement finances may end up making plans separately and missing out on making the most of the pension saving tax relief available between them. They may also have unrealistic expectations of what their combined retirement savings are worth.

“For many couples, the first step to agreeing regular pension contributions and eventually securing as comfortable a retirement as possible should be to take professional financial advice together.”

Another sign that pensions are a long way down the priority list, even in light of the pension freedom rule changes, is that only one in eight couples (13 per cent) aged 55 and over have altered their retirement income plans since the new rules came into effect in April 2015. In fact, nearly one in ten of all the couples surveyed (eight per cent) said that they didn’t even know there were new pension rules.

The pension freedoms have also brought about some new concerns for couples – the most common being making decisions that will lead to them running out of money in retirement (38 per cent). Other worries include making mistakes in retirement planning (20 per cent), facing unnecessary tax bills (16 per cent) and falling victim to fraudsters (11 per cent). And one in ten (11 per cent) couples actually believe that there are now too many retirement income choices.